Wednesday, October 8, 2014

Can a lawyer be the executor and beneficiary of a family member's estate?

Can a family member who happens to be a lawyer act as executor of an estate, as well as be a beneficiary of the estate? Is that a conflict of interest? A reader recently wrote to me to ask about this. Her question and my answer are below.

"My cousin's husband acted as executer and estate trustee to my grandmother's will when she died. Consequently, he, his wife and my aunt (her mother) stood at the same time, as a result of a last minute will change, to inherit nearly everything. It should be noted that when my aunt dies, what was given to her through this arrangement will also go to my cousin and to her husband, this lawyer. They are in Ontario. Obviously his position lacked objectivity and seeing he will stand to take or inherit everything, did he not act when their is a conflict of interest and should he have not, out of professionalism given this work to another member of the firm? Especially since everything will go to him and he has a direct financial interest?"

I had to read this a couple of times to get straight who's who. Here's what I understand: a family member who happens to be a lawyer acted as the executor of your grandmother's estate. He was also a beneficiary. Another beneficiary was your aunt. You believe that when your aunt dies, this lawyer and his wife will inherit the aunt's estate.

Your question is about conflict of interest, but I don't see any conflict at all in what you've presented.

Lawyers do have a duty not to act in situations where their own interests conflict, or may conflict, with those of their client. Lawyers dealing with elderly individuals have an even greater duty, as many of our clients are vulnerable to pressure. The details of that duty are not always clear to those outside of the legal profession, so I understand why you felt you had to ask this question.

If the lawyer were drawing up wills for people in which those people were leaving him their estates, I'd certainly see a conflict. In that case, he definitely should ask another member of the firm to draw up the wills. However, in the scenario you've described, the lawyer is not in control of who leaves what to whom; he is merely the executor and beneficiary. You did not say that he drew up the will, only that he was named executor of it. He hasn't done anything to make himself the recipient of the estate.

He was named as an executor of your grandmother's estate and carried out those duties. No, he should not have given the work to another member of the firm because the firm was not named as executor. A law firm can't be an executor. He was named individually (and just happened to be a lawyer), and therefore he had to do the work. No doubt he hired his own firm to do the probate application, but there is no conflict in doing so. That is well-established in the wills profession.

You mention that "his position lacked objectivity", but objectivity is not required of an executor vis-a-vis people who are not involved in the estate. He was given a will of a deceased person and asked to administer it. He's not allowed to stand back and decide whether the will is "fair" or not; his job is to distribute the estate as the will directs.

There is no law that says a beneficiary or family member who happens to be a lawyer cannot act as executor, any more than an accountant or baker or mechanic would be barred from acting as an executor. In fact, plenty of people like to name their relatives who are lawyers because they feel those individuals will do a good job of it.

I don't know how you are privy to what's in your aunt's will, or how you are aware of her plans to deal with her estate. She may change her will for all we know. But even if she doesn't change it, exactly what has this lawyer done that creates conflict? From what you have said, all he has done is be named as a beneficiary. Unless he drew up that will giving himself your aunt's estate, I just don't see it.

Yes, that occurred to me too, even though it wasn't stated in the reader's question. However, over the years I've noticed that some people think that any involvement at all by a lawyer is a conflict. For example, I've seen people try to start lawsuits just because the lawyer who drew the will went to school with or lived in the same neighbourhood as someone in the will. People obviously think we have a lot more power than we actually do :)

Hi Lynne, thank you for all the advice you give on the complexities of estate law in Canada. My question is (the estate consists of a house and surrounding property, with four beneficiaries) when the executor, who is a beneficiary, is living in the house for over a year since the deceased's will was probated, is he responsible for house taxes and house insurance, utilities and maintenance costs until the sale of the house? Thank you.

Utilities, yes. As a general rule, the other costs you have mentioned - taxes, insurance, and maintenance - should be paid by the estate. This is because those are costs that preserve the asset (house) itself. However, in your case, it seems that the executor is taking advantage. He should have been paying rent for the last year, in addition to utilities.

Lynne is the author of 10 books about estate planning, and one book about legal history.

Lynne is the editor of MC2, the national magazine of Mensa Canada.

Lynne is the former co-host of The Law Show, a weekly program on VOCM radio.

Lynne is a Learning Group Facilitator (online instructor) for the Legal Research and Writing and the Written Advice and Advocacy modules of the Alberta Bar Admission course.

She is a member of the Law Society of Newfoundland and Labrador, the Law Society of Alberta, the Canadian Bar Association, STEP Canada, ADR Atlantic Institute, the Canadian Institute of Certified Executor Advisors, and Mensa Canada.

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